Josh Frydenberg

The federal government’s upcoming review of climate change policies can address missed emissions reduction opportunities in the built environment, according to Property Council of Australian chief executive Ken Morrison. Though an option to install an emissions intensity trading scheme in the electricity sector has got some Coalition backbenchers worried.

In announcing the review’s terms of reference, energy and environment minister Josh Frydenberg lauded the centrepiece Emissions Reductions Fund as a success, however Mr Morrison said the ERF did not work for the property sector.

“While the Emissions Reduction Fund aims to target least-cost emissions reductions, structural barriers have prevented uptake in buildings, where many of the lowest cost abatement opportunities exist,” Mr Morrison said.

“Of the 397 projects contracted in the four [ERF] auctions to date, only four projects used the commercial buildings method. This is a significant missed opportunity.”

He said the PCA wants the review to adopt policies that will unlock the extensive, cost-effective abatement opportunities in the sector, such as those identified in ASBEC’s Low Carbon High Performance report.

The built environment currently comprises 23 per cent of national emissions, and the ASBEC report found that the right policies could deliver $20 billion in energy savings by 2030, up to 25 per cent of Australia’s 2030 emissions target and more than half the government’s energy productivity target.

“When we cut emissions in our cities our businesses are more efficient, our homes are less expensive to run and we are taking strain off the energy networks,” Mr Morrison said.

“The review must identify how we can meet our international obligations to reduce emissions in a way that encourages jobs, underpins investment, and supports trade competitiveness as well as support productivity and energy efficiency across the Australian economy.”

He said the PCA supported the government’s proposal that emissions reductions be considered on a sector-by-sector basis.

It also welcomed the decision to review the integration of state-based climate change and renewable energy policies across Australia into a national framework.

At the same time, Mr Morrison said the PCA wanted to see policies reflect the strong role the property sector can play in transitioning the national energy market to clean energy sources.

The government can avoid significant future infrastructure spending by incentivising and removing barriers to the broader of uptake of rooftop solar PV for Australia’s households and businesses, he said.

“We look forward to working with the government to ensure smart policies are put in place to unlock the enormous potential of our sector to contribute to meeting Australia’s emissions reduction commitments under the Paris Agreement.”

Frydenberg says it’s all peachy-keen

Mr Frydenberg said the government’s approach to climate change policy was one of meeting international emissions reduction commitments while maintaining “energy security and affordability”.

“The government is committed to adopting a non-ideological approach to emissions reduction to ensure we secure the lowest cost of abatement,” he said.

The government has ratified the Paris Agreement and currently has a target of reducing emissions by 26 to 28 per cent by 2030. It has also committed to a Renewable Energy Target of 33,000 gigawatt-hours by 2020, which was legislated in 2015.

Carbon concerns

Analysis released by Reputex today (Monday) said the review was expected to consider the introduction of an emissions intensity trading scheme for electricity generators, the potential role of “credible” international units in meeting Australia’s emissions targets and the interaction with domestic offsets.

However, this has caused concern among some backbenchers, with Liberal MP Craig Kelly, backbench committee on environment and energy chair, telling The Guardian that any form of carbon trading was “contrary to Coalition policy” and would not have support of the Coalition party room.

The Clean Energy Council, however, said the trading scheme would be a “meaningful move towards meeting national emissions targets and dealing with climate change”.

States in the driver’s seat

While the review will look into the impact of state-based policies on achieving an effective national approach, and there has been some negativity from the government on the higher targets set by the Labor state governments, RepuTex suggests the state policies could form a climate change “policy floor”.

The analysis said state policies were projected to play a large role in shaping the national policy framework.

This is reinforced by the “increasingly important role of the Council of Australian Governments (COAG) Energy Council”, it said.

“A new era of decentralised climate policy development is emerging in Australia, driven by ambitious renewable energy targets in the Australian Capital Territory, Queensland, South Australia and Victoria, with the states now emerging as the dominant player in the national climate policy debate.”

RepuTex modelling shows that renewable energy targets in the ACT, Queensland, South Australia and Victoria has overtaken the federal Renewable Energy Target, with 55 terawatt-hours (TWh) of new renewables generation forecast to enter the market by 2030.

It forecast this will result in renewable energy growth from 38TWh under the current federal RET to 93TWh by 2030, driven by new state policy. This is the equivalent of raising the RET from its current 23 per cent base to 35 per cent by 2030.

RepuTex said Australia was progressing towards a US-style of policy development, with states such as California taking their own road and implementing ambitious policy as they seek to reduce emissions and capitalise on investment.

“In effect, state-based initiatives may act as a ‘policy floor’ should the federal government’s policy review not enact an effective framework to meet Australia’s 2030 target. Inversely, the federal review may be able to ensure that a nationally co-ordinated policy approach is established, rather than a piecemeal regulatory framework.”

Is least cost really the best outcome?

The analysis also questioned whether pursuing the “least cost abatement” pathway will prove to be the most effective approach.

“Recognising that the overall objective of the Paris Agreement is to achieve deep decarbonisation of the economy by mid-century, the design of a durable and integrated policy framework could be achieved by distributing the emissions reduction effort among a broader range of sectors, positioning all sectors to contribute in the short-term in a way that is scalable over the long-term as policy ambitions change.

“Such an approach would enable policy to begin to unlock emissions action in strategic sectors that may otherwise not be prioritised due to political or economic barriers.

“For example, focusing solely on ‘least cost’ abatement that, for example, only targets efficiency and waste reductions, may lead to aggressive reform in the appliance and vehicle standards. However, this may result in delayed investment in more “expensive” abatement sources that are also needed to transition the Australian economy, such as the land and renewable energy sectors.”

It’s a big test for the government

“The climate policy review process will be a litmus test for the Turnbull government, specifically its ability to design a workable climate policy framework to meet Australia’s current (and future) emissions reduction targets, while managing internal divisions within the Liberal-National Coalition,” RepuTex said.

“The wide-scope of the ToR is a positive development, as is the reported participation of a number of senior ministers and portfolios in the design of the ToR and review process.”

  • Read the full analysis here

The discussion paper for the review is expected to be released in February 2017 for public consultation until some time in March 2017.

The government has said the review will “monitor and be informed by developments in international climate policy, and include a focus on electricity prices for end users”.

“The review will build on parallel processes, including the Finkel review of the reliability and security of the National Electricity Market, and the work of the Ministerial Forum on Vehicle Emissions.”

The specific terms of reference are:

  • the opportunities and challenges of reducing emissions on a sector-by-sector basis;
  • the impact of policies on jobs, investment, trade competitiveness, households and regional Australia;
  • the integration of climate change and energy policy, including the impact of state-based policies on achieving an effective national approach;
  • the role and operation of the Emissions Reduction Fund and its safeguard mechanism;
  • complementary policies, including the National Energy Productivity Plan;
  • the role of research and development and innovation;
  • the potential role of credible international units in meeting Australia’s emissions targets; and
  • a potential long-term emissions reduction goal post-2030

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